After Telecity, Bit-isle buyouts fuel $2.7bn in revenue, are more acquisitions on the cards for Equinix?

US colo Equinix has reported its 2015 end of year results, with revenues soaring 12% to $2.7 billion, from $2.4 billion in 2014.

However, during its earnings call, CEO Stephen Smith said "exploratory" talks are taking place with a "couple of big telcos" who are looking into divesting their data centre assets.

This follows in the wake of news from companies such as Verizon, CenturyLink and AT&T, who are looking at different options for their data centres worldwide, which includes the possibility of selling the sites.

During the earnings call, Smith said they have been approached by a few companies. "They are talking to several people; we are one of them," he said.

Smith also said that the company is indeed in talks with a "couple of big telcos" and "in exploratory stages".

Russell Poole, UK MD for Equinix, confirmed to CBR that there has been speculation around a couple of big telcos interested in divesting data centre assets. "At this point, Equinix is just one of many organisations being contacted in regards to this," he said.

Andrew Jay, head of data centre solutions EMEA at CBRE, said that 2015 had been the "perfect storm" for Equinix and given its global presence and track record in leading the consolidation activity, he would be surprised if they were not seriously considering the Verizon and CenturyLink portfolios.

He told CBR: "Given the high profile reaction of the competition authorities to the Telecity purchase I expect any additional purchases will come under the microscope and it is likely they will be called in to be reviewed.

"With the large scale consolidation taking place, the global authorities probably need to have a root and branch review of their stance on competition in the collocation world."

However, Andrew Buss, consulting director at IDC Europe for data centre infrastructure and client devices, said that what happened in Europe – when the EC required Equinix to divest assets to balance the European collocation market – may not happen in the US if Equinix buys such portfolios.

He said: "There is plenty of competition in the US, which probably would mean they would not have to sell any sites. The US tends to be more liberal."

Equinix’s global data centre footprint of 145 sites as of February 2016.

Colo bags $multi-billion revenues in year of acquisitions

The company also released its figures for Q4 2015, with revenues of $730.5 million, up 6% when compared to the previous quarter ($686.7 million) and a 14% rise on Q4 2014 ($638.1 million).

Equinix said revenues included $21.6 million of revenues from the acquisition of Bit-isle, which closed on November 2, 2015.

Recurring revenues, consisting primarily of collocation, interconnection and managed services, were $686.1 million for Q4, 6% over the previous quarter and a 13% increase over the same quarter last year. Non-recurring revenues were $44.4 million in the quarter.

Capital expenditures in Q4 were $280.6 million, as compared to capital expenditures of $216.0 million for the previous quarter and $238.5 million for the same quarter last year.

Acquisition costs in Q4 2015 amounted to $17.3 million, compared to $13.4 million in Q3 2015. As for the year, acquisition costs reached $41.7 million compared to $2.5 million in 2014.

Total operation expenses, which include sales and marketing, general and administrative costs, and acquisition costs, topped $242.6 million last quarter (Q3 2015: $220.3 million). In 2015, total operating costs reached $867 million, up from $736.6 million in 2014.

Poole said: "In 2015, Equinix delivered its 52nd consecutive quarter of growth. As the leading European interconnection company, we achieved accelerated growth, expanded our global platform with two strategic acquisitions, completed our first year operating as a REIT, and established ourselves as a foundation for the cloud ecosystem that continues to drive IT transformation."

Buss said the results show how well Equinix is doing and that "they are the leaders in the hosting and collocation space".

"The results prove their business roadmap to be working by providing the right services including local cloud for example. It shows a well run business growing organically and through acquisitions," he told CBR.

Equinix has also published its business outlook for 2016, forecasting a >30% growth for 2016, with revenues expected to be over $3.5 billion.

The company confirmed it will divest eight data centres, seven from Telecity and its London 2 hub (LD2), following the European Commission’s conditional approval of Telecity’s acquisition last November. It said it expects the facilities to have been sold by mid-2016.

For the first quarter of 2016, the company expects revenues to range between $838 and $842 million. Capital expenditures are expected to range between $235 and $255 million, which includes approximately $30 million of recurring capital expenditures and $205 to $225 million of non-recurring capital expenditures.

"In the near term, we will focus our energy on successfully integrating Telecity and Bit-isle and growing our market leadership globally. Over the longer term, interconnection will continue to be the essence of our advantage, and Equinix is well-positioned to become the intersection point between the Internet of Things, clouds, networks and the enterprises."

Buss also said that as companies look for outside providers for their IT needs as digitalisation accelerates, this will drive more business towards Equinix.

He said: "They are not being silly on the prices they pay and on the acquisitions they are making. It should be a good year for them."